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One of the Best Investments to Make

300px-Assorted_United_States_coinsTraditionally when we think of investing our minds turn to stocks, bonds, mutual funds or real estate. While these may or may not be the best investments for an individual’s portfolio there is one investment that is almost always the right choice for any individual – human capital.

Human capital is an individual’s worth of their own potential. Coined by economist Theodore Schultz, human capital can be invested in like any other asset in order to add value to an individual’s life through earnings, health, and quality of life.  

One of the classic examples of investing in human capital would be the decision to go to or go back to school. Generally, the investment enhances and expands an individual’s knowledge of a particular subject or subjects and enables them to be more qualified for employment in that particular field. Such specialization (such as a doctor, attorney, and professor) generally allows that individual to demand a higher income thus improving earnings, and quality of life.

Another example of investment in human capital would be eating healthy foods and exercising. Generally, this investment allows for greater health which improves quality of life, longevity and the potential to earn more as an individual is not decreasing their production due to missing work for being sick. An individual also saves money by not paying higher life and health insurance premiums to name a few.

The good news is that investment in human capital doesn’t have to be that costly. In other words, the returns can be exponential for very little cash outlay. For example, you may be able to check with your employer to see if they offer tuition assistance in order for you to take classes that will make you a more productive employee.

Several institutions offer online MOOCs which are free online delivery of college course material. Visiting different universities’ web sites can help guide you to the course that’s relevant. YouTube has an amazing selection of recorded material ranging from recorded finance classes from MIT to basic algebra from community college. The Khan Academy also has a wide array of courses and material – all for free.

For your health, it doesn’t cost a thing to put on some shoes and take a brisk walk or go for a run. Doing bodyweight exercises such as push-ups and pull-ups are free. Your employer may even offer discounts for joining the local health club. Eating healthy foods doesn’t have to be expensive either. In fact, it may be less expensive to eat healthy – depending on what you’re buying. I talk about this in my book (insert shameless plug here).The investment in your health and happiness boosts your human capital.

Investing in your human capital with knowledge and health is an excellent addition to your (hopefully) well-diversified portfolio of wealth.

3 Comments

  1. Suzuki GSXFA says:

    Just enjoyed reading your ebook on Amazon.com . What’s your view on driving an old car versus leasing one? I didn’t like owning a car, I was spending thousands of dollar on repairs and the car broke down on more than one occasion leaving us stranded waiting for AAA to turn up. So got rid of it and with no money down leased a reliable German car for 250 per month, which probably is marginally higher than repair costs plus AAA membership for an old car but lots of peace of mind.

    1. sraskie says:

      Thanks for your comment. I am more of a fan of outright ownership as I at least have the asset and I’m not making a monthly payment.

  2. Anne says:

    Hi Mr. Raskie: I thoroughly enjoyed previewing your book “Lose Weight, Save Money: An Owner’s Manual to Physical and Financial Fitness”; correlating health and wealth; health influences wealth; and wealth beneficially influences health: ex.
    “Wealth can pay for better food; fitness equipment; sports clubs; warmer clothes”;
    Wealth is a definite advantage: wealthy people are more likely to “get Vaccines too”
    I think Bill Gates attests to this thank you !!! A.

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